August 24, 2019 / 8:46 AM / a year ago

South Africa to publish Eskom plans in next few weeks

JOHANNESBURG (Reuters) - The South African government in the next few weeks will publish a paper outlining how it plans to put troubled state power utility Eskom on a path to long-term stability, the Department of Public Enterprises said on Saturday.

Electricity pylons are seen along the cooling tower of the defunct Orlando Power Station in Soweto, South Africa, June 28, 2018. REUTERS/Siphiwe Sibeko

Eskom, which supplies more than 90% of the power in Africa’s most advanced economy, is reliant on state bailouts to survive and has had to implement rolling power cuts.

It reported a loss of 20.7 billion rand ($1.36 billion) in its most recent financial year.

President Cyril Ramaphosa has proposed a bailout and restructuring, but it is not clear how this will be balanced with political sensitivity to job cuts nor whether it will be enough to fix Eskom’s problems.

The department said its paper would clearly outline the government’s plan to make the struggling utility sustainable.

“The paper will reflect the urgent work that is taking place to identify options to resolve the debt challenge, the process for restructuring Eskom and importantly, to ensure a just transition,” the department said in a statement.

Fixing Eskom is one of the biggest challenges faced by Ramaphosa, whose economic reform drive has been jeopardised by power outages that have dented growth this year.

Eskom has been hurt by a steep rise in salary, fuel and debt-servicing costs over the past decade.

Its financial performance has also been hurt by corruption and repeated tariff awards by the country’s energy regulator that are below what Eskom says it needs to recoup its costs.

Chief Restructuring Officer Freeman Nomvalo is working on dealing with Eskom’s debt and financial challenges and a number of options are being evaluated by experts, the Department of Public Enterprises said.

Ramaphosa and the minister of public enterprises, Pravin Gordhan, have made initial contact with unions over the planned restructuring, a key component of which is separating Eskom into different units for transmission, generation and distribution, the department said.

Splitting Eskom into three business units could take four years, the company said in an internal presentation seen by Reuters.

Consultations over Eskom’s future were continuing at both a management and government level, the statement said.

Eskom will also deploy around 200 technical and engineering staff to power stations to ensure stable generation, it said.

($1 = 15.2369 rand)

Reporting by Emma Rumney; editing by Jason Neely

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